General Electric: Breaking Us Up Is Un-American

General Electric, one of the 'Corporate Welfare Friday' trio, warned that proposals threatening its finance unit would restrict U.S. lending activity.

(Update includes analyst comments from the earnings conference call; updated share prices throughout.)General Electric ( GE) executives strongly implied on a conference call Friday that Obama administration proposals that threaten to break up its industrial and financial units would be bad for America's still- fragile economy.

Executives, speaking with analysts after reporting second-quarter results, said forcing GE to separate the two units would restrict lending activity in the U.S.

"We're providing a lot of capital to the markets, especially in the U.S.," Chairman and CEO Jeff Immelt said on the call, noting that GE lends to consumers and small- and mid-sized businesses.

GE General Counsel Brackett Denniston said the Obama administration proposals would "affect important sources of lending when the country needs lending." Denniston said GE has "heard considerable skepticism" from members of Congress about the Obama administration proposals, particularly those that would break up financial and industrial companies.

Denniston reiterated comments Immelt has made in recent days, arguing that mixing banking and commerce was not a cause of the crisis. He says GE should be grandfathered, or granted an exception to the Obama proposals, because its existing business mix was already in place before any changes would go into effect.

That would be a neat trick: not only would GE not have to break itself up, it would also be protected from any potential competitors who wanted to try and replicate its mix of industrial and banking activities.

Alas, analyst Steven Winoker of Sanford Bernstein, on the conference call, noted that the regulatory proposal put forth by the Obama administration specifically said grandfathering would not be allowed. And while Jeffrey Sprague of Citigroup wondered whether the Obama proposal was aimed directly at GE, Denniston didn't take the bait.